NDP vows to cap power prices
Changes aimed at shielding families from volatility
Alberta’s electricity system will see sweeping changes under plans being announced in dribs and drabs by the province this week.
On Tuesday, Premier Rachel Notley outlined the first shift — an electricity price ceiling of 6.8 cents per kilowatt-hour for four years.
According to the government’s website, the average Albertan home uses 600 kWh per month.
The vast majority of people pay below 6.8 cents now, but Notley said the capping rates from June 2017 will shield families from the volatility of the power market.
But she also hinted at a larger change in the pipeline — re-regulating Alberta’s power market, at least to a point. The market here was deregulated in 2001, and remains one of only two “energy-only” models in North America (the other is Texas). The set-up means power generators are only paid for the energy they produce, not how much they are capable of producing.
Notley said Tuesday the energy-only model just isn’t attracting investors any more.
“Investors who would otherwise have put capital in are otherwise starting to hedge their bets,” she said. “It’s our view that that is the fundamental problem we need to address at this point.”
The NDP’s 2015 election platform included a promise to “properly and effectively ‘smart regulate’ Alberta’s electricity retail system,” with the goal of stabilized power prices and protection from financial manipulation.
Historically, regulated electricity rates in Alberta have been extremely volatile, increasing by as much as 65 per cent in a single month, as in April 2011, or crashing by as much as 42 per cent, as was the case in June 2014.
Although Tuesday’s announcement will eliminate unpredictably high power bills, the cost of electricity in Alberta is currently at historically low levels.
Most consumers here who aren’t on a contract pay just over half the government’s 6.8 cent target for their power right now; across the three major power providers, the average rate in November to date is 3.811 cents per kilowatt hour.
Experts say the price will remain low for the next couple of years, but if there’s an unexpected jump in the price of natural gas, a natural disaster or a large power plant breaks down, that’s hard to manage.
Then there’s the government’s planned phase-out of coal, which was already in the works when the NDP took power.
Notley said the 6.8 cent ceiling will keep prices low as the province transitions off coal, though the details on how exactly the government will implement the cap are still hazy.
To develop the plan, it will reach out to industry, retailers and consumers, with consultations starting in December.
Regulation of the market, though, would bring more tools for the government to keep the cost of power production under the 6.8-cent cap.
Even without regulation, there are options; government officials floated the idea of physically buying power for four years, or using carbon tax funds to plug the gap if producing power gets past 6.8 cents.
Either way, Notley said power companies won’t swallow the difference if the wholesale cost of producing power rockets past the cap.
The opposition thinks the NDP plan is ill-thought out.
Progressive Conservative energy critic Rick Fraser said Alberta’s deregulated power market may have its problems, but it has worked for the province.
“We never had a problem with investment, we never had a problem with our energy grid, consumers paid a low price, they had reliable power,” he said.
“(The government is) creating a problem where there is no problem.”
Wildrose critic Don MacIntyre is steadfastly opposed to moving away from Alberta’s current energy-only market, fearing the cost of building more power generation will soon fall onto the backs of taxpayers.
“This government has an underlying agenda and we won’t get the whole picture until they’re done with this puzzle,” he said.